Existing North American oil pipelines boost capacity as new projects drag on

Canada’s three major options for new oil pipeline capacity continue to face delays and court challenges, but existing North American pipelines are finding ways to move more barrels to refiners and export docks on the US Gulf Coast.

Midstream companies’ second-quarter earnings cycle revealed a wave of compressor-based pipeline expansions across the US Rockies and Midwest to increase throughputs at low costs and without major regulatory and construction risks.

TC Energy and Enbridge are also using chemicals called dragreduction agents to move more heavy crude in the same amount of pipeline space. That will allow TC Energy’s Keystone pipeline to move 50,000 b/d more by next year, and boost Enbridge’s Mainline capacity by 85,000 b/d.

“It’s quite a different thing to try to permit a complete new pipeline,” said Susan Grissom, chief industry analyst for the American Fuel & Petrochemical Manufacturers.

Plains All American Pipeline is holding an open season to gauge demand for a 70,000 b/d expansion of its Western Corridor system to move light oil from Canada, Montana and Wyoming. The barrels could eventually move to the Red Oak and Liberty pipelines bound for Texas export terminals in Corpus Christi and Houston. If Plains lines up commitments, it would target startup in the second quarter of 2021.

Magellan is moving ahead with a horsepower-based 60,000 b/d expansion of its Saddlehorn pipeline. Shipper interest may require another 40,000 b/d of capacity in the near future, CEO Michael Mears said August 1. The extra capacity will be available in late 2020. Magellan owns the line with Plains and Anadarko Petroleum.

Energy Transfer plans to nearly double capacity on the Dakota Access Pipeline to 1.1 million b/d by late 2020, from 570,000 b/d currently. The project would rely on extra horsepower from new and expanded pumping stations in North Dakota, South Dakota and Illinois, requiring no mainline construction or additional pipe. Dakota Access carries about 40% of total Bakken production.

AFPM’s Grissom said the sort of low-cost, low-risk expansions being seen across the North American pipeline sector is also happening in Gulf Coast refineries, where they can optimize piping within plants to improve production.

“It’s more efficient without building additional crude distillation capacity or additional gasoline producing capacity,” she said. “The refinery can produce more and process more, but what you’re doing is just making it more efficient.”

Lack of sufficient takeaway to take away mounting volumes of Canadian crude oil had caused price discounts for Western Canadian Select to widen to as much as $51/b to Cushing WTI in late 2018, causing the Alberta government to implement production curtailments for producers. The curtailments have been adjusted each month as market conditions warrant.

S&P Global Platts Analytics expects Enbridge’s Line 3 expansion to begin moving crude from Hardisty, Alberta, to Superior, Wisconsin, in mid-2021 and TC Energy’s 830,000 b/d Keystone XL and/or the Canadian federal government’s 590,000 b/d Trans Mountain expansion to British Columbia be completed by late 2022.